Blog Post

Battered by the global LTE war, Alcatel-Lucent will cut 5000 jobs

The global race against its old enemies Ericsson(s eric), Nokia Siemens Networks(s nok)(s si) and new rival Huawei, is taking its toll on Alcatel-Lucent(s alu). The Franco-American vendor revealed on its second quarter earnings call that it would cut 5000 jobs by the end of 2013 in a new retrenchment effort.

The cuts aren’t as severe as the 17,000 layoffs Nokia Siemens announced in December, but they represent 7 percent of Alcatel-Lucent’s total employee base. At the company’s earnings call on Thursday, CEO Ben Verwaayen didn’t name specific divisions or regions targeted for pink slips, but he said the cuts would be across the company, including in its home country of France.

Alcatel-Lucent makes both wireline and wireless gear, but it has struggled in particular to make the transition from older 3G mobile technologies to new 4G networks. Alcatel-Lucent has always been dominant in CDMA, but investment in older 2G and 3G technologies has dwindled as carriers look to LTE. While Alcatel-Lucent bridged that generational gap in the U.S. quite easily – landing major pieces of Verizon(s vz)(s vod), AT&T(s t) and Sprints’(s s) LTE contracts – it has seen much less success in international markets, ceding market share to its three main rivals.

North America accounts for 39 percent of Alcatel-Lucent’s sales, and those sales were down 8.3 percent in the second quarter to €1.4 billion (U.S. $1.7 billion), contributing to its €254 million loss.

According to a recent ABI Research study, Nokia Siemens is the now world’s leading LTE vendor in terms of new contracts and intellectual property. Ericsson and Huawei, which are battling for the title of largest overall telecom vendor, ranked second and third respectively. Alcatel-Lucent came in fourth in an LTE market that many believe can only support two or three primary equipment makers.

Verwaayen, however, did identify one source of revenue the vendor plans to tap. He said Alcatel-Lucent would create a separate business division to manage its 44,000 patents, which could have substantial value. Alcatel-Lucent still owns Bell Labs, the industrial research giant created by the old AT&T monopoly and the wellspring of many of the world’s most important tech inventions. Bell Labs is a shadow of its former self, having seen its once mammoth applied research budget slashed, but it developed many of the key innovations that went into today’s optical and wireless networks.